To grow with government securities market: First Capital Treasuries IPO opens on 6th

By Rajiesh Seetharam | Published: 2:00 AM Dec 2 2021
FT To grow with government securities market: First Capital Treasuries IPO opens on 6th

By Rajiesh Seetharam

First Capital Treasuries (FCT) officially announced the launch of IPO to offer 7,695,000 ordinary voting shares to the public. Shares have been priced at Rs 39.00 and offers an immediate upside of 15 to 19 per cent to an incoming investor given the value range of Rs 46 to Rs 48  Share derived as per the Independent Valuation carried out by EY Transaction Advisory Services (Private) Limited. FCT aims to raise Rs 300 million from the IPO.

First Capital Treasuries PLC is a subsidiary of First Capital Holdings PLC, a member of the Janashakthi Group. FCT is one of the five non banking primary dealers in government securities.

FCT had an asset base of Rs 25.7 billion as of 31 March 2021, Net Trading Margin of Rs 3 billion, PAT of Rs 1.84 billion, a five year average ROE of 29 per cent,  dividend payout of around average 50 per cent for the past 10 years.

Addressing a media briefing, FCT Director/ CEO Dilshan Wirasekera stated that FCT is the highest rated primary dealer, ‘A’ rated, with stable outlook by ICRA Lanka Limited.

“The decision to list FCT on the Diri Savi Board is part of the Company’s strategy to create liquidity for our shares, broad-base the ownership, to further enhance our brand identity and to take advantage of tax concessions offered by the Budget 2021.

“Presently, the Company is the market leader amongst non-bank primary dealers with a capital base of Rs 4.5 billion, which is well above the CBSL requirements. The Company continued to account for the highest amongst non-bank primary dealers,” he said.

He added that government securities are the safest and risk free asset class, and FCT maintains a 100% government securities portfolio. 

“Colombo Stock Exchange market capitalisation is Rs 4.9 trillion, whereas the Government securities are a 9.5 trillion market. The Government also wants to move to source funds locally, which means the Government securities market is going to grow, which in turn will benefit FCT to grow. Three years ago, there were 15 primary dealers. Now there are only 10, and the market is growing at 15 per cent per annum. We see a greater opportunity to grow,” he remarked.

The Company doesn’t need any new capital, thus there isn’t much need to retain profits on large basis, therefore, stock holders can expect higher dividends (50 per cent average for past 10 years) to continue noted Wirasekera.

FCT reported a Loss after Tax of Rs 414 million for the six months ended 30 September 2021.

The September 2021 financial statement states that unanticipated tightening of the monetary policy measures in mid of August 2021 resulting in an upward shift in the yield curve, as the reason for losses.

 “Earnings are cyclical in this sector. Primary dealers make money during declining interest rate. During the period when interest rates raise, it’s more about managing risk. I recommend investors to look into medium to long-term. It’s not a short-term fund – this is a Company which has long term value, which you can notice during our five to ten years of performance,” he stated.

Pre IPO, First Capital Limited had 94.44 per cent ownership of FCT, which will be reduced to 89.44 per cent post IPO, as five per cent equity stake is offered to public via IPO. Employee Trust Fund has five per cent ownership, pre and post IPO.

The issue opens on 6 December 2021 and closes on 23 December 2021. Minimum subscriptions per application is 100 shares, shares will be allotted in multiples of 100.

By Rajiesh Seetharam | Published: 2:00 AM Dec 2 2021

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